Don’t thank PNoy: Economic growth does not necessarily mean good governance!

790 Shares

noynoy_aquino_082

Lately I’ve been seeing these posts thanking the president for increasing our Gross Domestic Product (GDP) by something like 120 billion USD.

It upsets me because it betrays a piss poor understanding of economics.

I’ll give you two reasons why this thinking is wrong — because two is more than enough.

First and foremost, the government has spent massive amounts of money in the past five years. The current budget alone is 3 trillion pesos. A three trillion peso government budget is a massive infusion to the GDP. That’s approximately 250 billion USD even before factoring multiplier effects (and of course government inefficiency – an indispensable variable in any equation that involves the government). Put simply, any administration can jack up the GDP by simply enlarging the national budget and spending government tax revenue and loans. It’s what the government does. It spends money. I’m not even going to go into how much debt we’ve incurred to finance that gargantuan budget.

You’d think that with that kind of budget we would have state-of-the-art trains, seamless and reliable transport systems, better and more affordable healthcare, free colleges, fast and reliable public internet, high-quality public K-12 schools, license plates with functioning bar codes (or license plates for that matter), and highly automated government services buuuuut, yeah, never mind.

Second, overseas Filipino worker (OFW) deployment has been surging for the past five years. On average there are 350,000 to 400,000 new officially-registered deployments every year. That is almost 2 million Filipinos sent abroad as OFWs in the past five years. That is an extra 2 million OFWs on top of the previously deployed OFWs. That’s billions of dollars in remittances – every month, every year. That is billions of dollars that will feed into the economy through consumer demand. You’re going to thank the government for sending our countrymen and countrywomen abroad? I suppose you can tout that as an “export-oriented policy” wherein your primary export would be people.

What economic reforms were put in place? What productivity enhancing major infrastructure projects were completed in the past five years (sans those began by the previous administration)?

How about the real performance of the economy as measured by real income gains? Nobody is talking about real income gains BECAUSE THE REAL INCOMES OF MOST PEOPLE DID NOT INCREASE. How about poverty? The poverty incidence numbers have stayed the same despite the fact that the poverty threshold is increasing at a rate lower than the headline inflation rate. Never mind that the inflation rate among the poor is easily twice or thrice the headline inflation rate – which basically means that we are grossly underestimating poverty. How about inequality? Our GINI is inching dangerously close to 50%. While real incomes of most people stay the same, the net worths of the elite is doubling – even tripling. How about the agricultural sector? Myanmar is about to overtake us in terms of agricultural productivity. Myanmar guys Myanmar. They’ve been at each other’s throats for years, decades even, and they are about to eclipse our agricultural productivity.

But, you know, who cares. The GDP INCREASED.

print

13 Comments on “Don’t thank PNoy: Economic growth does not necessarily mean good governance!”

  1. Apparently your OFWs numbers dont add up. Upon Pnoy taking over until now if we look at POEA stats, it is 1.6M to to 2.4M OFWs. If I look at PSA stat it was 2.3M in 2014, 2.1M in 2012. If followed what you said add an extra 2 million, we should have 3.6M by now which is not true.

    If we based this on Revenues. The poorer you are the greater your gross income increased, Accdg to 2012 Family Income and Expenditure Survey. Even the Rich from 2009 to 2012 had negative growth in their revenue income.

    Now comes the juicy part, net income. Meaning this includes lifestyle inflation. Who do you think will be more fiscally responsible to save or not overspend beyond their means? The poor or the Rich? Hard to blame the government in net income.

  2. Thanks for articulating this. This is the problem when one economic metric is used without considering other relevant metrics.

    Moreover, I bet Philippines’ GDP will rise this year thanks to election-related spending.

  3. so my question is this. If the GDP had decreased, you will also crictize pnoy for the economic woes? In addition, is it also the government’s fault for the lack of increase on the workers incone in the private sector? The government is not sending its citizens abroad, that is blatantly false. The OFW’s are seeking jobs abroad because the living wage in the Philippines is pretty low and many could not find a job and, if they do, it’s not enough for their families to live on.

    The biggest problem is corruption in the local and national government. There are also people who are too damn lazy to work, or they just do not want jobs that they think is below them. There also those who keeps on having many babies even if they can hardly afford it. Some just want a handout. Some spend money beyomd their means.

    Most often it is not how much money you spend, it is about how you maintain your lifestyle. You just can’t rely on the government – you have to help yourself. The government can only do so much – like the basic social services.

    There are those who do not save, and spend most of their wages in good time. You can not blame the governement alone for poverty unless your governent is like that of Malawi, burundi, somalia, etc.

    1. Even if we become a first world nation it is not assured the end of overseas workers. Even France and Germany have overseas workers/ remittances in billions dollars each.

      The author made a mistake writing the blog based on conjectures. I would have believe the author had the author wrote there was a net gain of 700k OFWs in pnoys administration for last 5 years. But instead jumped to the conclusion that there was an increase of 2M.

      Even the “most people income did not increase” is counter factual as well not Unless the author based income on net rather than revenues. Since the poorest of the poor have been getting the highest % increased revenue long before PNoys presidency, since GMA’s time, based on statistics.

  4. Would/Could/Can it be possible in the Philippines case, that the PH government just spends money by minting and printing extra money at the security plant complex of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) in Quezon City (being not counterfeit money but real money)?

    1. That will cause inflation. In essence, making the worth of peso small.

      To understand this, with 1000 peso, I can buy three pizzas, but with inflation, my 1000 peso may be able to buy two or one pizza.

  5. I may have a piss poor grasp of economics,but I think my maths is better than the posters.PHP 3 trillion at the current exchange of about 45 is around USD 66 billion,not 250.His figure for OFW increases also assumes close to the higher end of the annual number of new contracts,as well as nobody taking say 2 2year contracts in that period or any pre-existing OFWs returning and not taking up a new contract.

    He also implies that the current government budget is a new injection,without stating what size the budget that PNoy inherited was.This would give a better appreciation of how much of the PHP 24B annualised increase is due to government action.

    In isolation,the increase in GDP is pretty meaningless.What percentage is it? 1%? 10%? 100%? How does it compare to previous presidencies or similar regional economies?How much is inflation and how much productivity?Which sectors have grown to provide this increase?What changes have there been to GDP per head of population?

    Frankly,I have trouble following Deep Throat’s arguments,although this may be due to language misunderstandings.I classify ‘poor’ as the unemployed,Jose the road digger,Juan the virtually subsistence farmer,and Jenny the single mother who dropped out of school at age 14.I cannot see how their income has increased much,if at all,either gross{meaning before taxes} or net{meaning after taxes}.Of course those lower down the economic totem pole are likely to spend extra income.If you exist on pagpag,might Jollibees be nice?If your celebration is at Jollibees,how about TGIFridays?Trade in your clapped out car for a nice new SUV?

    Certainly,1st world countries have their citizens working abroad.The Governor of the Bank of England is a Canadian.I would suggest that the vast majority are in high paying jobs with very competitive standards,working for companies {or themselves} where the ability to produce results is the number 1 criterion.How many OFWs fit that description,especially as the term usually excludes those raised or educated abroad?

    Finally,the poster specifically referred to REAL INCOMES by capitalizing it.This is usually accepted as the proportion of your NET income spent to purchase the same goods and services as in the previous period.For example,if electricity prices rise,and you wish to run your aircon for the same length of time as before,and your income has not increased,you have less money to buy everything else,so your REAL income has fallen.

    Rant over.

  6. The GDP may increase; but, I still see many people, living in poverty and below poverty. I see the squatters invading every inch of land areas in every cities in the Philippines. I see, the prices of food and basic commodities, increase by three/four fold.

    I see the rich and political oligarchs grow richer; and the rest of us, grow poorer every day. I see, the LRT trains in the most lousy way , they are operating. I see massive graft and corruption in every level of the government. I see, the plunder of our national treasury by: Aquino , Mar Roxas, Abad and their cahoots. I see, smuggling of rice and huge rice importation….

    I do not see progress, as Aquino and his cahoots see the economy of our country.

  7. 3Trillion budget is 63B USD not 250B USD. A big difference. This is a spending of 630 USD per person which a massive underspending by the government.

    63B is not enough for big infra projects that is why they have now resorted to PPP. Government needs to spend on projects that will improve the economy that is why the debt to gdp ratio is very important. An decreasing debt to gdp is very good and is an indicator of efficient use of government funds.

    You cannot really expect any administration to take our country to first world status. Sound, stable, business friendly policies will do that over a span of years.

  8. This article is good because it is one of an increasing number that calls out the Aquino administration and its admirers for the supposed wondrous growth that has been achieved over the past 6 years. The truth is that growth was of poor quality, resting on OFW remittances and the resulting boost in consumption. Meanwhile no industrialization strategy has been put in place, assuring that job creation and wages remain poor in the philippines.

  9. Fantasy and drama appeal to most, if not all, Failipinos in the Failippines. They are socially acceptable and make you feel good about yourself. Moreover, Failipinos get rewarded for being cleverly ignorant.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.